Top

Public Organization Review

Published in:

28-01-2022

Social Capital and Financial Performance in Nonprofits

Authors: Scott Dell, Meena Subedi, Maxwell K. Hsu, Ali Farazmand

Published in: Public Organization Review | Issue 1/2022

Activate our intelligent search to find suitable subject content or patents.

search-config

AI-assisted search

Off

Abstract

Nonprofits provide services for the common good and are having an increasing influence on the economy over time. There is consensus among prior studies in for-profit settings that social capital positively influences corporate financial performance. In contrast, this study analyzes the association between social capital and nonprofit organizations’ financial performance. Nonprofits headquartered in high social capital regions are expected to have better oversight from the community participants and better networking opportunities for the community participants. Thus, we expect and provide evidence that social capital is positively associated with nonprofits’ financial performance.

previous article The Impact of Acculturation on the Leadership Style of Afghan American Registered Nurses Working in the United States’ Healthcare System

next article Author Correction: Call for Proposals Articles for a Special Issue of Public Organization Review (POR) on Global Responses to the COVID-19 Pandemic

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Farazmand (2002, 2009) shed light on the importance of society and citizens for building a new administrative capacity and argue that current public services should involve citizens in order to address the concern for accountability and ethics in public service.

Prior research also discusses the role of community social capital to understand and shape public policies and encourages researchers to study community social capital in greater detail (Helliwell, 2006). More specifically, Helliwell (2006) argues that individuals holding important network positions in a societal network are able to drive their agendas in making public policy.

Andersson, U., Forsgren, M., & Holm, U. (2015). The strategic impact of external networks: Subsidiary performance and competence development in the multinational corporation. In M. Forsgren, U. Holm, & J. Johanson (Eds.), Knowledge, networks and power (pp. 318–343). Palgrave Macmillan. https://doi.org/10.1057/9781137508829_13CrossRef

Barnes, P. (1987). The analysis and use of financial ratios: A review article. Journal of Business Finance & Accounting, 14(4), 449–461. https://doi.org/10.1111/j.1468-5957.1987.tb00106.xCrossRef

Bhandari, A., Bhuyan, M. N. H. (2020). Local religiosity and insider trading activity. https://doi.org/10.2139/ssrn.3891720.

Bhandari, A., & Golden, J. (2021). CEO political preference and credit ratings. Journal of Corporate Finance, 68, 101909. https://doi.org/10.1016/j.jcorpfin.2021.101909CrossRef

Bhandari, A., & Kohlbeck, M. (2018). Impact of corporate social responsibility activities on analysts' behavior. Advances in Quantitative Analysis of Finance and Accounting, 16, 73–116. https://doi.org/10.6293/AQAFA.201812_16.0003CrossRef

Bhandari, A., Mammadov, B., Shelton, A., & Thevenot, M. (2018). It is not only what you know, it is also who you know: CEO network connections and financial reporting quality. Auditing: A Journal of Practice & Theory, 37(2), 27–50. https://doi.org/10.2308/ajpt-51821CrossRef

Bhandari, A., Golden, J., & Thevenot, M. (2020). CEO political ideologies and auditor-client contracting. Journal of Accounting and Public Policy, 39(5), 106755. https://doi.org/10.1016/j.jaccpubpol.2020.106755CrossRef

Borenstein, D., & Kugelmass, H. (2019). Governance snack-sized dataset. Retrieved 3/18/19 from: https://www.open990.com/catalog/

Bourdieu, P. (1997). Outline of a theory of practice. Cambridge University Press.

Bowman, W. (2002). The uniqueness of nonprofit finance and the decision to borrow. Nonprofit Management & Leadership, 12(3), 293–311. https://doi.org/10.1002/nml.12306CrossRef

Boytsun, A., Deloof, M., & Matthyssens, P. (2011). Social norms, social cohesion, and corporate governance. Corporate Governance: An International Review, 19(1), 41–60. https://doi.org/10.1111/j.1467-8683.2010.00829.xCrossRef

Brick, I., & Chidambaran, N. (2010). Board meetings, committee structure, and firm value. Journal of Corporate Finance, 16(4), 533–553. https://doi.org/10.1016/j.jcorpfin.2010.06.003CrossRef

Calof, J. (1994). The relationship between firm size and export behavior revisited. Journal of International Business Studies, 25(2), 367–387. https://doi.org/10.1057/palgrave.jibs.8490205CrossRef

Cavusgil, S., & Nevin, J. (1981). Internal determinants for export behavior. Journal of Marketing Research, 23, 114–119. https://doi.org/10.1177/002224378101800114CrossRef

Chang, C., & Tuckman, H. (1991). Financial vulnerability and attrition as measures of nonprofit performance. Annals of Public and Cooperative Economics, 62(4), 655–672. https://doi.org/10.1111/j.1467-8292.1991.tb01372.xCrossRef

Coffe, H., & Geys, B. (2005). Institutional performance and social capital: An application to the local government level. Journal of Urban Affairs, 27(5), 485–501. https://doi.org/10.1111/j.0735-2166.2005.00249.xCrossRef

Cooke, P., & Wills, D. (1999). Small firms, social capital and the enhancement of business performance through innovation programmes. Small Business Economics, 13(3), 219–234. https://doi.org/10.1023/A:1008178808631CrossRef

Desai, M. A., & Yetman, R. J. (2015). Constraining managers without owners: Governance of the not-for-profit enterprise. Journal of Government & Nonprofit Accounting, 4(1), 53–72. https://doi.org/10.2308/ogna-51138CrossRef

Farazmand, A. (2002). Administrative ethics and professional competence: Accountability and performance under globalization. International Review of Administrative Sciences, 68(1), 127–143. https://doi.org/10.1177/0020852302681007CrossRef

Farazmand, A. (Ed.). (2004). Sound governance: Policy and administrative innovations. Greenwood Publishing Group.

Farazmand, A. (Ed.). (2006). Handbook of globalization, governance, and public administration. CRC Press.

Farazmand, A. (2009). Building administrative capacity for the age of rapid globalization: A modest prescription for the twenty-first century. Public Administration Review, 69(6), 1007–1020. https://doi.org/10.1111/j.1540-6210.2009.02054.xCrossRef

Farazmand, A. (2012). Sound governance: Engaging citizens through collaborative organizations. Public Organization Review, 12(3), 223–241. https://doi.org/10.1007/s11115-012-0186-7CrossRef

Farazmand, A. (2017). Governance reforms: The good, the bad, and the ugly; and the sound: Examining the past and exploring the future of public organizations. Public Organization Review, 17(4), 595–617. https://doi.org/10.1007/s11115-017-0398-yCrossRef

Fernandez, J. (2008). Causes of dissolution among Spanish nonprofit associations. Nonprofit and Voluntary Sector Quarterly, 37(1), 113–137. https://doi.org/10.1177/0899764006298965CrossRef

Ferris, S. P., Javakhadze, D., & Rajkovic, T. (2017). CEO social capital, risk-taking and corporate policies. Journal of Corporate Finance, 47, 46–71. https://doi.org/10.1016/j.jcorpfin.2017.09.003CrossRef

Fredette, C., & Bradshaw, P. (2012). Social capital and nonprofit governance effectiveness. Nonprofit Management & Leadership, 22(4), 391–409. https://doi.org/10.1002/nml.21037CrossRef

Gilbert, L., Menon, K., & Schwartz, K. (1990). Predicting bankruptcy for firms in financial distress. Journal of Business Finance & Accounting, 17(1), 161–171. https://doi.org/10.1111/j.1468-5957.1990.tb00555.xCrossRef

Gooderham, P., Minbaeva, D., & Pedersen, T. (2010). Governance mechanisms for the promotion of social capital for knowledge transfer in multinational corporations. Journal of Management Studies, 48(1), 123–150. https://doi.org/10.1111/j.1467-6486.2009.00910.xCrossRef

Greenlee, J., & Trussel, J. (2003). Predicting the financial vulnerability of charitable organizations. Nonprofit Management & Leadership, 11(2), 199–210. https://doi.org/10.1002/nml.11205CrossRef

Helliwell, J. F. (2006). Well-being, social capital and public policy: what's new? The Economic Journal, 116(510), C34–C45. https://doi.org/10.1111/j.1468-0297.2006.01074.xCrossRef

Hopkins, D. (2011a). Translating into votes: The electoral impacts of Spanish-language ballots. American Journal of Political Science, 55(4), 814–830. https://doi.org/10.1111/j.1540-5907.2011.00534.xCrossRef

Hopkins, N. (2011b). Religion and social capital: Identity matters. Journal of Community & Applied Social Psychology, 21(6), 528–540. https://doi.org/10.1002/casp.1120CrossRef

Javakhadze, D., Ferris, S., & French, D. (2016). Social capital, investments, and external financing. Journal of Corporate Finance, 37, 38–55. https://doi.org/10.1016/j.jcorpfin.2015.12.001CrossRef

Jha, A., & Chen, Y. (2015). Audit fees and social capital. The Accounting Review, 90(2), 611–639. https://doi.org/10.2308/accr-50878CrossRef

Jo, H., & Harjoto, M. (2011). Corporate governance and firm value: The impact of corporate social responsibility. Journal of Business Ethics, 103(3), 351–383. https://doi.org/10.1007/s10551-011-0869-yCrossRef

Kandori, M. (1992). Social norms and community enforcement. The Review of Economic Studies, 59(1), 63–80. https://doi.org/10.2307/2297925CrossRef

Keating, E., Fisher, M., Gordon, T., & Greenlee, J. (2005). Assessing financial vulnerability in the nonprofit sector. Hauser Center for Nonprofit Organization, paper no. 27. Retrieved 2/2/18 from: http://ssrn.com/abstract=647662

King, N. K. (2004). Social capital and nonprofit leaders. Nonprofit Management & Leadership, 14(4), 471–486. https://doi.org/10.1002/nml.48CrossRef

Knack, S. (2002). Social capital and the quality of government: Evidence from the United States. American Journal of Political Science, 46(4), 772–785.CrossRef

Knack, S., & Keefer, P. (1997). Does social capital have an economic payoff? A cross-country investigation. The Quarterly Journal of Economics, 112(4), 1251–1288. https://doi.org/10.1162/003355300555475CrossRef

Laitinen, E., & Suvas, A. (2016). Financial distress prediction in an international context: Moderating effects of Hofstede’s original cultural dimensions. Journal of Behavioral and Experimental Finance, 9, 98–118. https://doi.org/10.1016/j.jbef.2015.11.003CrossRef

Lambert, R., Leuz, C., & Verrecchia, R. (2007). Accounting information, disclosure, and the cost of capital. Journal of Accounting Research, 45(2), 385–420. https://doi.org/10.1111/j.1475-679X.2007.00238.xCrossRef

McKeever, B., & Gatty, M. (2016). The nonprofit workforce: By the numbers. Nonprofit Quarterly, October 24, 2016. Retrieved 2/12/18 from: https://nonprofitquarterly.org/2016/10/24/nonprofit-workforce-numbers/

National Center for Charitable Statistics. (2018). The NCCS Data Archive. Retrieved 6/6/2021 from: http://nccs.urban.org/

Nonprofit Open Data Collective. (2019). Open data for nonprofit research. Retrieved 6/6/2–2021 from: https://nonprofit-open-data-collective.github.io/overview/

Ohlson, J. (1980). Financial ratios and the probabilistic prediction of bankruptcy. Journal of Accounting Research, 18(1), 109–131. https://doi.org/10.2307/2490395CrossRef

Portes, A. (1998). Social capital: Its origins and applications in modern sociology. Annual Review of Sociology, 24, 1–24. https://doi.org/10.1146/annurev.soc.24.1.1CrossRef

Prentice, C. (2016a). Understanding nonprofit financial health: Exploring the effects of organizational and environment variables. Nonprofit and Voluntary Sector Quarterly, 45(5), 888–909. https://doi.org/10.1177/0899764015601243CrossRef

Prentice, C. (2016b). Why so many measures of nonprofit financial performance? Analyzing and improving the use of financial measures in nonprofit research. Nonprofit and Voluntary Sector Quarterly, 45(4), 715–740. https://doi.org/10.1177/0899764015595722CrossRef

Prysmakova, P. (2019). Understanding relationships between public service motivation and involvement in socio-political organizations: Perspectives of organizational field theory. Public Administration, 97(2), 429–450. https://doi.org/10.1111/padm.12577CrossRef

Prysmakova, P. (2021). Institutional antecedents of public service motivation: Administrative regime and sector of economy. Nonprofit Management & Leadership, 32(1), 99–119. https://doi.org/10.1002/nml.21464CrossRef

Putnam, R. (2000). Bowling alone: The collapse and revival of American community. Simon & Schuster.

Putnam, R., Leonardi, R., & Nannetti, R. (1993). Making democracy work: Civic traditions in modern Italy. Princeton University Press.

Rankings. (2018). Retrieved 11/17/18 from: https://www.nationalservice.gov/serve/via/rankings

Ritchie, W., & Kolodinsky, R. (2003). Nonprofit organization financial performance measurement: An evaluation of new and existing measures of financial performance. Nonprofit Management & Leadership, 13(4), 367–381. https://doi.org/10.1002/nml.5CrossRef

Rupasingha, A., Goetz, S., Freshwater, D. (2018). County-level measures of social capital. retrieved 12/27/18 from: https://aese.psu.edu/nercrd/community/social-capital-resources.

Saxton, G., & Benson, M. (2005). Social capital and the growth of the nonprofit sector. Social Science Quarterly, 86(1), 16–35. https://doi.org/10.1111/j.0038-4941.2005.00288.xCrossRef

Schneider, J. A. (2009). Organizational social capital and nonprofits. Nonprofit and Voluntary Sector Quarterly, 38(4), 643–662. https://doi.org/10.1177/0899764009333956CrossRef

Spence, L. J., Schmidpeter, R., & Habisch, A. (2003). Assessing social capital: Small and medium-sized enterprises in Germany and the UK. Journal of Business Ethics, 17–29. https://doi.org/10.1023/A:1026284727037

Subedi, M. (2020). Public-private partnership and bureaucracy. In: Farazmand A. (eds), Global encyclopedia of public administration, public policy, and governance. Available at SSRN: https://ssrn.com/abstract=3861953

Subedi, M., & Farazmand, A. (2019). Membership Organization’s social capital and the impact on nonprofit sector management. International Journal of Public Administration, 42(10), 880–892. https://doi.org/10.1080/01900692.2019.1599313CrossRef

Subedi, M., & Farazmand, A. (2020). Economic value added (EVA) for performance evaluation of public organizations. Public Organization Review, 20(4), 613–630. https://doi.org/10.1007/s11115-020-00493-2CrossRef

Tevel, E., Katz, H., & Brock, D. (2015). Nonprofit financial vulnerability: Testing competing models, recommended improvements, and implications. International Society for Third-Sector Research, 26(2015), 2500–2516. https://doi.org/10.1007/211266-014-9523-5CrossRef

Trussel, J. (2003). Revisiting the prediction of financial vulnerability. Nonprofit Management & Leadership, 13(1), 17–31. https://doi.org/10.1002/nml.13103CrossRef

Trussel, J., & Greenlee, J. (2004). A financial rating system for charitable nonprofit organizations. Research in Governmental and Nonprofit Accounting, 11, 105–127.

Tsai, W., & Ghoshal, S. (1998). Social capital and value creation: The role of intrafirm networks. Academy of Management Journal, 41(4), 464–476. https://doi.org/10.5465/257085CrossRef

Tuckman, H., & Chang, C. (1991). A methodology for measuring financial vulnerability of charitable nonprofit organizations. Nonprofit and Voluntary Sector Quarterly, 20(4), 445–460. https://doi.org/10.1177/089976409102000407CrossRef

Wu, W. (2007). Dimensions of social capital and firm competitiveness improvement: The mediating role of information sharing. Journal of Management Studies, 45(1), 122–146. https://doi.org/10.1111/j.1467-6486.2007.00741.xCrossRef

Title: Social Capital and Financial Performance in Nonprofits
Authors: Scott Dell
Meena Subedi
Maxwell K. Hsu
Ali Farazmand
Publication date: 28-01-2022
Publisher: Springer US
Published in: Public Organization Review / Issue 1/2022
Print ISSN: 1566-7170
Electronic ISSN: 1573-7098
DOI: https://doi.org/10.1007/s11115-021-00570-0

Springer Professional

Abstract

Please log in to get access to your license.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Other articles of this Issue 1/2022

Outsourcing Strategies in Public Services under Budgetary Constraints: Analysing Perceptions of Public Managers

Social Accountability: E-Monitoring Public Management in an Emerging Economy

Publisher Correction: Does Discrepancy Between Job Choice Motivation and Satisfaction and Education–Job Mismatch Affect Turnover Intention of Nonprofit Employees?

Assessment of the Leadership Styles in Public Organizations: an Analysis of Public Employees Perception

Linking Personality Traits, Self-Efficacy and Burnout of Teachers in Public Schools: Does School Climate Play a Moderating Role?

Citizens’ Behaviour and Compliance in Sub Saharan Africa Local Governments: the Role of Social Capital